• Lower US Treasury yields on Tuesday presented difficulties for the USD/CAD exchange rate.
• The Canadian dollar may be under pressure as a result of the declining WTI price.
• Given market anticipation that the Fed would start an easing cycle, the greenback may suffer.

Although it stays in the negative territory, USD/CAD reduces intraday losses, which may be related to an improving US dollar (USD). Tuesday’s Asian trading hours see the USD/CAD pair edging down to 1.3580.

Furthermore, the drop in the price of crude oil would have increased pressure on the Canadian Dollar (CAD), strengthening the USD/CAD pair. The cost of a barrel of West Texas Intermediate (WTI) oil is currently trending downward, hovering around $81.70. However, once the US Energy Information Administration (EIA) raised its projected prices for crude oil and petroleum products for the rest of 2024, oil prices rose.

Furthermore, the Bank of Canada (BoC) indicated in its most recent meeting minutes that rate cuts may occur in 2024, which put negative pressure on the Canadian dollar (CAD). Deputy Governor Toni Gravelle reaffirmed the Fed’s objective to finish quantitative tightening by 2025, highlighting the program’s durability in the face of gradual reductions in interest rates. The Canadian Gross Domestic Product (GDP) numbers for January are expected to be released on Thursday, and investors will undoubtedly be watching for this news, which could affect market mood even more.

 

By press time, the US Dollar Index (DXY) is slowly rising to 104.20, an attempt to reverse previous losses. On the other hand, the US Dollar might have been under pressure due to the drop in US Treasury yields. With speculation pointing to a possible June start, market sentiment is trending toward predictions that the Federal Reserve (Fed) will begin an easing cycle. On Tuesday, traders are expected to examine the Consumer Confidence report for February.

Raphael Bostic, president of the Atlanta Fed, says he only sees one rate cut this year and emphasizes the possibility of more disruption if rates are lowered too soon. On the other hand, Chicago Fed President Austan Goolsbee anticipates three cuts, in line with most of the board. Goolsbee, however, stresses that before supporting rate reductions, there must be further proof of a decrease in inflation.